In an interview with ET Now, G Chokkalingam, Executive Director & Chief Investment Officer, Centrum Wealth Management, shares his views on the current market scenario and some sectors and stocks. Excerpts:

ET Now: What should we expect this year from the equity markets?

G Chokkalingam: We firmly expect another 20% upside. The market should be quite robust during January to September, but one has to be very cautious in the last quarter of 2013 because there will be early election in 2014. On the eve of election, we firmly believe that the FIIs would sit on the sideline or they can even start booking the profits. So the investors should think of booking profits much before the October-December quarter in the sense they should do that somewhere in August or September. Till that time, I do not see any risk except monsoon. The forecast is likely to come in May and the investors should be watchful about the monsoon forecast because last time southwest monsoon had failed. Now even the north-western monsoon has been failing, and there has been a deficit of 19%. So India at this juncture cannot afford to have a consecutive failure of monsoon. Otherwise, I still remain very optimistic and the market should give minimum 20% return in the current calendar year.

ET Now: What are your top picks for 2013?

G Chokkalingam: I would still prefer midcap. That segment has outperformed in 2012 and I firmly believe that in 2013 also it will outperform in a big way.

ET Now: Just take us through your midcap picks right now and then we will come to blue chip picks.

G Chokkalingam: On top of my mind is South Indian Bank. In fact, I would suggest all the investors to buy all three old private sector banks, namely South Indian Bank, City Union Bank and Karur Vysya Bank, because the Banking Amendment Bill is the bigger trigger for these three banks and all these three banks do not have controlling promoter stake in the banks and therefore, there is a possibility of at least one of them being acquired. So even if one is acquired, other two will improve the valuations. So, among these three, the topmost pick is South Indian Bank and second, I would strongly recommend Jai Corp. It could be a blockbuster in 2013. It is a tactical call supported by the fundamentals.

Tactical because the stock has come down by 95%, almost zero debt company and the company has got investments in Reliance Industries as well as it has got investments in the real estate. Tactically, the stock can give you 100-200% return, but investors should be prepared for 10% downside risk maximum. The third stock would be the Balmer Lawrie. I firmly believe that the PSU space which has not performed well in 2012 should do very well in 2013 and Balmer Lawrie, which is available at close to 5% dividend yield and around 4-5 PE, could be a multibagger in the next 1-2 years. In 2013, it can give even 40-50% upside. The last two calls are Indoco Remedies and Jammu Kashmir Bank. Â Indoco Remedies is a good consistent growing midcap pharma company. I firmly believe that in midcap pharma and midcap IT, there could be further consolidation. So that should improve the valuation of a stock like Indoco. Jammu Kashmir is a very amazing bank, consistently growing banking stock, though it is owned by the government and the stock is available at around 1.5 price to book. There is a possibility of even the split and bonus because the stock price has crossed 1000 and in the last 4-5 years, the profit has gone up by about fivefold and that kind of performance would be maintained by the bank. These are my top five picks in the midcap space.

ET Now: What about large caps? What would be your top three picks there?

G Chokkalingam: I would recommend firmly NMDC because by fag end of this current calendar year, the global growth should start improving. Already the iron ore prices have started improving almost by 30-40% from September last year. So NMDC, a beaten down stock with cash more than 22000 crore, should be a major beneficiary. The second stock would be Tata Motors. I firmly believe that the reversal of interest rate cycle is certain in the current calendar year. That would benefit most commercial vehicle manufacturers. The third stock would be ICICI Bank. It has got all ingredients in terms of investments in security business, insurance, AMC and there would be re-rating of this particular bank in the current calendar year. The fourth idea is ITC. I still believe that ITC can continue its outperformance in the current calendar year as well. Within one or two quarters, ITC should be able to turn around FMCG business other than cigarette. So these are my top picks in the large cap space.